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Software and business methods: more playing around at the edges?


For the last 25 years, debate has raged as to where the line falls between patentability and non-patentability of business method and software-related inventions. Although the broad distinctions were drawn up some years ago, debate into the finer detail remains ongoing.

At R&G we have a sophisticated practice advising clients operating in non traditional patent areas such as banking and finance. The nuances in decisions worldwide can often affect our clients’ prospects for patent protection. In a rapidly changing field applicants are faced with the prospect that what is patentable now may not be patentable by the time a patent office picks up their application to examine it. Applicants in this area have to be prepared for the law to change either in their favour or against them.

In the US, the recent case of CLS v Alice (CLS Bank v Alice Corp. (Fed CIR 2013) (REN Banc)) demonstrated that the extent to which a computerised business method could be patented is still very much a live issue. The most recent round of the debate as to the patent eligibility of business method claims came to a head in the US Supreme Court decision on Bilski. This decision set out the “machine or transformation” test for deciding whether a business method could be the subject of a US patent, but at the same time held that that was not the only test for deciding what was patent eligible subject matter. The Bilski test requires that a method either a) relates in the transformation of matter, for example by making something, or b) is implemented with a particular machine that is specifically devised and adapted to carry out the process and that is not conventional nor trivial. The court also held that abstract ideas are not patent-eligible but did not define what it meant by abstract.

The CLS v Alice case was concerned with methods of reducing settlement risk by effecting trades through a third party intermediary empowered to verify that both parties can fulfil their obligations before allowing the exchange to be completed. Of particular note was the fact that many of the method claims were not written in a “post-Bilski” form that related the steps of the method to the part of the computer system that performed that step. The decision was en banc, meaning that all ten judges of the Court of Appeal for the Federal Circuit heard the case. In a magnificent display of judicial independence they reached seven different decisions. There was no majority support for any opinion but seven of the ten judges agreed that the method claims were not patent eligible. Perhaps more importantly, eight of the ten were of the view that the claims should stand or fall together regardless of whether they were method or apparatus claims.

In this case, the court decided that the method was an abstract idea because it is a “disembodied” concept and un-tethered from any real world application. One wonders whether the decision would be the same had the claims been drawn to a computer-implemented method which tied these method steps to physical features of a computer system.

The decision shows that there is still much judicial disagreement as to a reliable test for patent-eligible subject matter and we can suppose that the US Supreme Court will be asked to consider the question again before too long.

Interestingly, the US Patent Office has reacted to the decision by issuing a memorandum to the Examining Corps notifying examiners that there is no change in examination procedure for evaluating subject matter eligibility. The memorandum noted the multiple divergent opinions and stated that it was considering whether further detailed guidance is needed.

Other Jurisdictions

In our 20th May update we reported on the HTC v Apple case in the UK Patent Office which held that software which presented an improved interface to application programmers constituted an improved device which was therefore patentable. In the EPO, the position is fairly settled, the question of patentability being treated as one of inventive step and the Office looking for a technical solution to a technical problem as evidence of an invention. There is still no answer to the question of “what is technical?”.

Meanwhile the New Zealand Government passed a bill last month confirming that computer programs are not patentable. Whilst this appears to be a very dramatic change, closer inspection suggests that New Zealand is moving its law towards the European standard which holds that inventions that are no more than computer programs cannot be patentable. If the computer program delivers a technical improvement, the invention will still be patentable.

It is clear to us that it will be many years before this area finally settles down. However, technical inventions which rely on software remain patentable worldwide and computer related inventions where the improvement is non-technical, such as a business method, are still patentable in a number of jurisdictions although it is increasingly important that these cases are very carefully drafted and carefully worded.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking before any action in reliance on it.

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